On the 16th (local time), the Wall Street Journal (WSJ) reported that Chairman of the Federal Reserve Jerome Powell warned that the current high interest rates could persist as long as inflation slips out of control. This suggests that the Fed may delay an interest rate cut until the end of the year.
On the same day, Powell attended a Canadian economic forum in Washington, D.C., and said, “It seems it will take longer than previously expected to be confident that inflation falls to our 2% target.”
He continued, “We need to maintain the current policy stance for a longer period,” implying that there will be no rate cut for some time.
He clearly stated that he was not considering a rate hike. However, he said, “If inflation proves to be more stubborn, we will maintain the interest rate at its current level as necessary.”
This is a huge turn. Until the beginning of this month, Fed executives, including Powell, had taken the position that an interest rate cut is appropriate given the strong U.S. economy.
At the March Federal Open Market Committee (FOMC) meeting, most Fed executives expected that it would be appropriate to cut interest rates two or three times this year, with a slight majority expecting at least three cuts.
However, after all the inflation indicators released subsequently exceeded market expectations, Powell said today that it is likely to take longer than expected for inflation to fall to 2% and that several inflation figures need further confirmation. The WSJ interpreted this as postponing the interest rate cut until the end of the year.
The WSJ added that if inflation is not controlled by the end of the year, the interest rate cut could fail, and the interest rate cut within the year could be lost.
Despite the significantly reduced possibility of an early interest rate cut, the U.S. stock market had mixed results. Bitcoin rose about 1%, breaking through $64,000 again, so the market did not suffer a significant shock.
Experts unanimously agree that this is because the market has largely abandoned expectations for an early interest rate cut.